Apple scared it doesn't have... what Samsung does

Legal documents submitted during court proceedings can be really boring, but not if you’re talking about arguably the most interesting corporate legal battle raging today.

The patent proceedings in Apple Vs. Samsung case have thrown up interesting documentary evidence about why Apple Inc. (NASDAQ:AAPL) is running scared of Samsung (NASDAQ: SSNLF) and the likes, and why the latter should be extremely happy with its advertising and marketing teams.

The patent infringement lawsuit filed by Apple alleges that the South Korean electronics giant has infringed upon five of its patents. Apple is of course trying hard to prove to the court, the jury and the world at large that Samsung has been copying its patents and gaining unfair advantage over it.

Samsung, on the other hand, is trying to prove that Apple is trying these tricks in the book only because it is fast losing market share, leadership status – and face – in the global smartphones battle.

So, among the documentary evidence that Samsung submitted to the court was a presentation that was used to cross-examine Phil Schiller, Apple’s Head of Marketing, last April.

The 2014 planning document noted that growth rates in smartphone sales have slowed down since peaking in 2009. But that’s generic. The document acknowledges that “strongest demand” from consumers came from “less expensive and larger screen smartphones”.

Apple also criticised itself for following “unfriendly” policies with carriers, which along with Apple’s subsidy premium and high share were what the Cupertino-based firm thinks is responsible for the carriers’ strong interest in capping iPhone sales.

It also acknowledges, along with an Android logo in an ambiguous reference to Samsung, that “competitors have drastically improved their hardware and in some cases their ecosystems” and that some are “spending obscene amounts of money on advertising and/or carrier/channel to gain traction,” again in a veiled reference to Samsung.

However, perhaps the most damaging slide (for Apple) in the documents seems to be the one titled “Consumers want what we don’t have” which shows that out of the 228 million unit growth that the market saw between 2011 and 2012, the vast majority of 159 million units came from phones that were priced below $300 and had screens bigger than its own 4-inch displays.

Both the Samsung Galaxy S4 Mini and the Samsung Galaxy S Duos fall in that category, besides the Motorola Moto G, LG Optimus L9 and the Sony Xperia L. 

According to a report in The Verge, Schiller downplayed the presentation, the rest of which has been sealed by Apple’s lawyers, saying it was for an off-site meeting with “a few sales people,” and not something he attended.

Samsung also apparently told the court how Apple officials were unnerved by Samsung’s advertising strength.

In a 2013 email, posted by Recode, the email was sent to Apple’s ad agency Media Arts Laboratories. Schiller’s perturbed email to James Vincent from Apple’s outside ad agency Media Arts Lab said: “I watched the Samsung pre-superbowl ad that launched today… It’s pretty good and I can’t help but thinking ‘these guys are feeling it (like an athlete that can’t miss because they are in a zone), while we struggle to nail a compelling brief on iPhone.”

This is one of a few instances in which Apple’s concern about its competitors has been revealed in such detail. “That’s sad because we have much better products,” the email goes on. “Something drastic has to change. Fast,” Schiller wrote in a portion of the email obtained by CNET.

In another correspondence, Schiller told Vincent “I now have Apple board members asking ‘what is going on with advertising and what are you going to do to fix it’. The team is too good to be in this spot.”

The Verge says Samsung pushed the matter in its cross-examination of Schiller — pulling up a related email thread between Schiller and Cook — where Schiller expressed unhappiness with Media Arts Lab’s response to his concerns.

“We may need to start a search for a new agency,” Schiller wrote in an email to Cook. “I’ve tried hard to keep this from being the situation, but we are not getting what we need from them and haven’t been for a while.”

While Schiller downplayed the contents of the presentation and the emails, telling his lawyers in court that this was part of routine brainstorming, two things that are becoming increasingly clear are that, one, the world will get a bigger iPhone 6 this year, and two, we’ll get much better insight into what goes on behind closed doors in the Cupertino giant’s headquarters.

Hopefully, both will be quite interesting and worth the hype.
 

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